Employer and employee rights during a global pandemic

Employment Matters During COVID-19 – employer and employee rights during COVID-19

Navigating business during a recession triggered by a global pandemic can be a minefield, so we created this article covering key information for both employees and employers. If you’re in over your head and need an experienced employment lawyer or commercial law solicitor, you’ll find us at Carlile Dowling.

Information for employees

COVID-19 has created significant uncertainty in the workplace. We have set out below a summary of the Government response:

Wage subsidy

The Wage Subsidy Scheme is available to all businesses including:

  • Self-employed individuals
  • Contractors/sole traders
  • Registered charities
  • Incorporated societies
  • Post settlement governance entities.

The wage subsidy is also available to employers who recently let employees go because of COVID-19, provided they re-hire those same employees.

To be eligible for the wage subsidy, businesses must declare that they:

  • Have had a 30% revenue drop attributable to COVID-19
  • Will retain named employees for the duration of the grant (12-weeks)
  • Will pay said employees, at a minimum:
    • For any work they do at their normal rates
    • At least 80% of income where reasonably possible – for employees working reduced hours while self-isolating
    • The full subsidy received for each named employee, except where a person’s income is normally less than the subsidy amount, in which case they can be paid their normal salary.

Wage subsidy rates

  • $585.80 (gross) per week for full-time employees, where full-time is 20 hours or more per week
  • $350.00 (gross) per week for part-time employees, where part-time is less than 20 hours per week.

Employers must pass the full amount received onto the employee – except in the case where a person’s income is normally less than the subsidy amount (i.e. $250 a week), in which case they can be paid their normal salary. Any difference should be used for the wages of other affected staff.

Wage subsidy payment

The subsidy will be paid as a lump-sum and covers 12-weeks per employee declared. Employers can pass on the subsidy and additional wages through their usual pay cycles or other intervals at their discretion. As long as the employees get their allocated 12-week salary, there shouldn’t be a problem, however it may be a good idea to consult your staff on how they’d like to be paid.

Letting staff go

In this economic climate it’s highly likely that your business is facing financial losses. If you’re looking at redundancy options, your first consideration should be whether to apply for the wage subsidy to help you keep workers employed where possible. If you feel it’s necessary to let employees go, you have three potential options: redundancy, termination on ‘frustration of contract’ grounds, or firing them.

While firing employees is an option, it’s only available as a disciplinary action. This action arises where there has been ongoing incompetence, misconduct, or making a mistake granting sufficient concern that they are no longer merited. It’s very unlikely this would be a necessary action during this pandemic. However, if it was the best course of action, the employee’s agreement will set out the process that you have to follow in the event that you are considering this process. It is important that this process is followed.

Redundancy is the most common course of action in this current climate. Redundancy is the process of evaluating your company and determining what jobs/titles are unnecessary. You need to have legitimate and justifiable actions that will withstand outside scrutiny. Are you targeting one person/role, or many people/roles? Make sure this is not a termination dressed up as a redundancy. Honesty, good faith and transparency are key.  It is critical before you begin a redundancy that you have the process prepared and mapped out. If the process is clear it will enable the affected staff to understand what is happening and the timeframes involved. A clearly defined process can also be used by the employer as evidence that the redundancy was undertaken in good faith.

During unusual times like these, there’s a third option for letting staff go – termination on ‘frustration of contract’ grounds. It’s not ideal, but it is an option. For example, if a firm had four staff members that couldn’t gain remote location access to their files and/or office systems before lockdown. It could be argued that the staff in question couldn’t perform a key part of their duties, therefore “frustration of employment” could be used to terminate their employment contracts. Please note that this frustration of contract can be a difficult argument to navigate; the reality is, that if the employer cannot continue to pay staff, then redundancy may be the more practical option to consider.

How to avoid losing staff

Whilst much in the employment field is changing the underlying obligation of ‘good faith” has not. Employers and employees understand that these are the most challenging of times and that businesses are under financial pressure.

Carlile Dowling has talented and experienced employment lawyers that will support you with the right information and recommended actions for your specific situation. Get in touch at 06 835 7394 or complete this application.

Information for employers

Whatever situation you are facing just know that standard employment laws continue to  apply to all employment relationships. Nonetheless, COVID-19 has presented new options, challenges and assistance to help see you through this pandemic.

Essential workers’ leave support

Some people who work in essential services may be in situations where they need to stay away from work and cannot work from home. They, or someone they live with, may be sick with COVID-19 or have had close contact with someone infected. Or they may be at higher risk of severe illness if they contract COVID-19 and have agreed with their employer that they will not work. For these groups of essential workers, the government has created the Essential Workers Leave Support. It is designed to support public health goals and financially help workers who need to stay at home because of these conditions. Employees and employers should work together to identify if they are eligible for this kind of support.

Please note that employers cannot apply for the COVID-19 Leave Support scheme and the COVID-19 Wage Subsidy scheme for the same employee at the same time.

It should also be noted that the minimum wage rose from $17.70 per hour to $18.90 per hour as of 1 April 2020. This will be taken into account by the government when/if your employer receives a wage subsidy.

Wage subsidy

Assuming your employer has applied for the Wage Subsidy Scheme, you should be getting:

  • $585.80 (gross) per week for full-time employment, where full-time is 20-hours or more per week
  • $350.00 (gross) per week for part-time employment, where part-time is less than 20-hours per week.

If the wage subsidy is more than your normal salary, your employer will allocate the surplus toward other employees’ salaries.

If your employer has received a wage subsidy but you haven’t received a payment, you don’t think you’ve received the right amount, or you have questions about how the subsidy is being applied to you, it’s important you talk to your employer in the first instance. If after speaking with your employer you cannot resolve your problem, or think your employer has behaved fraudulently in relation to the subsidy, you can make a complaint with Employment New Zealand.

Taxes on wage subsidies

The Wage Subsidy Scheme is considered excluded income to businesses and is also GST exempt. When passed on as wages, businesses don’t get a deduction for income tax purposes. Payments to employees under the modified Wage Subsidy Scheme are wages, therefore they are subject to standard deductions like PAYE, ACC levies, KiwiSaver contributions, and student loan repayments.

Being made redundant

If your employer has gone down the redundancy route and your job/title has been made redundant, where does that leave you? First you need to clarify why your job/title has been made redundant. Businesses need to provide sufficient information showing they are experiencing one or more of the following issues before they start a redundancy process:

  • A financial downturn
  • The company has losses they can no longer afford to carry
  • The company needs to change its structure to cope with significant change
  • Needs have changed and one person can now handle the work that previously three people did.

You most likely wouldn’t find yourself in this position if your employer wasn’t experiencing financial difficulties. But if you feel you’re being let go without sufficient reason, it may pay to get professional advice as soon as possible.

After you have read this article — time, energy and costs considered — our advice is to complete your own independent research at the government’s Ministry of Business, Innovation and Employment site at https://www.mbie.govt.nz/ before contacting us for legal assistance.

Because employment law is highly specialised and is constantly evolving, it requires expert input. If you need qualified legal advice from experienced commercial law specialists contact Carlile Dowling at 06 835 7394 or complete this application.

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